Question: John owns a small farm on a lake. A local developer offers John $400,000 cash for his farm. The developer believes Johns farm will be

John owns a small farm on a lake. A local developer offers John $400,000 cash for his farm. The developer believes John’s farm will be very attractive to home buyers because it is on a lake. After John turns down the initial offer, the developer offers to pay John $250,000 plus an amount equal to 10% of the selling price for the homes that are developed and sold. Identify the tax issues John should consider if he accepts the offer.

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